28 de enero de 2010

UNICEF reports that the number of children around the world that chronically undernourished, or stunted, has risen to nearly 200 million, and that 130 million children are underweight. Undernutrition is responsible for more than one-third of all deaths for children under five.

chronic undernutrition in the first two years of life leads to irreversible damage in adult life. Addressing nutrition in this critical window of opportunity is vital to prevent irreversible impairments in physical growth and cognitive development.

World Bank says that scaling up nutrition programmes in high burden countries would cost just US$11.8 billion a year.

27 de enero de 2010

JEFFREY SACHS is considered one of the world's foremost development economists. He is also one of the most productive. Mr Sachs is the director of the Earth Institute at Columbia University, an itinerant adviser to poor-country governments, and special adviser to Ban Ki-moon, the UN secretary general. Mr Sachs has authored numerous articles, reports and books, including "The End of Poverty" and "Common Wealth". Most recently he has put forth a strategy for rebuilding Haiti. On Friday I spoke to Mr Sachs over the phone and asked him some questions about the rebuilding effort and America's role in helping Haiti recover. Here's an edited transcript:

DIA: You've written that American relief and development institutions do not function properly. What's wrong with them?Mr Sachs: For roughly 25 years US development assistance has been scaled back when measured against need and against the scale of the US economy (and hence the “ability to aid” and fair international “burden sharing”). Over the course of many years we have stripped USAID of a strategic role and it became a kind-of contracting agency, heavily focused on war zones as an adjunct to US military and foreign policy, rather than operating as a world-leading development institution. I am hoping that this might change, finally, under new management.The American people, in general, are also not particularly supportive of development assistance. Many people, in fact, think we spend far more money in development than we actually do. They're only vaguely aware of development assistance, and how it can work. It is deemed by Congress and the White House to be poor politics, although I think that is a mistaken view by the politicians. And as a result we just haven't carried out a significant international development effort in this county for quite a long time, and the institutions have atrophied as a result.

DIA: Focusing on Haiti, you've called for America to appropriate at least $1 billion this year and next for the country. Based on what you just said, how can I be confident that the money is going to get to where it needs to go?Mr Sachs: I want the money to come from the US, but not to go through the US government. What I'd like is for US and other donor money to be put into a multi-donor trust fund (MDTF). My specific recommendation is that the MDTF should be located at the Inter-American Development bank. There are a lot of reasons for that. In essence the IADB is a development-finance institution that works well, has a long-term commitment to Haiti, has a lot of expertise, and is competent in handling money and organising projects with the proper monitoring, auditing and evaluation. And so I think that when you scan the institutional environment, the IADB seems the best place to do this. I think that relatively little of the aid should go through the bilateral development agencies of any of the major donor countries.

DIA: Have you been happy with Barack Obama's response to the disaster?Mr Sachs: Yes, in the sense that he's paying significant attention to it. He's organised a massive effort by US agencies, including the military. So yes, I am happy with it.I do feel, however, based on a lot of experience, that this attention will wane rather quickly, and so we want to institutionalise the response and not have it depend on the day-to-day interest of the president of the United States.

DIA: In the long term, if you were in charge of developing American policy towards Haiti, what would you do?Mr Sachs: Like any long-term development problem, Haiti has suffered from both a lack of infrastructure—roads, power systems, water and sanitation systems, rural and agricultural development—and a failure of internal institutions. And the US has unfortunately had a hand in both of these shortcomings, though there are massive internal sources of failure as well. So it's a complicated situation.In order to have a successful long-term response to this crisis we have to view it from a long-term development perspective, meaning that beyond the emergency relief and stabilisation efforts, the thinking has to be oriented to helping the country escape from what has been two centuries of poverty and, more recently, two decades of downward spiral. To do this we must address both physical and organisational shortcomings . We need a strategy that is consistent with Haiti's geography, its resources, its endowments and its potential development path. Haiti needs a strategy that is both rural and urban, focusing on agriculture, light manufacturing and services, and at the same time one that builds, nearly from scratch, an internal institutional capacity to manage in the future. In the field of development there are lots of examples of how these things can get done. I believe that this is how we should be oriented and I believe that Haiti can be successful.It's a remarkable thing, but in the past we never actually supported the basics in Haiti. For decades after Haiti’s independence, the US did not even recognise the country. In the 20th century, the US occupied the country militarily, and left behind little except further decades of military rule. Haiti was also a pawn in the cold war. More recently there have been decades of trauma, from the political upheavals of the 1980s and 1990s until the earthquake. In the early 1990s, the US imposed a trade embargo to restore President Aristide to power, and then a few years later under George W. Bush squeezed Haiti’s economy to chase Aristide from power! Even after devastating hurricanes hit the country in 2008, the US and other countries offered little practical help to Haiti despite lots of good speeches and pledges and positive signs from outside. The world, including the US government, just couldn't get organised to do anything practical, up until the earthquake.So it has been a very, very long time—literally decades, though one could argue two full centuries—where the international politics and the domestic politics and the strategy have been out of alignment. Finally, now, there seems to be the right combination of factors, where we have a supportive international community, a potentially productive partner inside the country, and a realistic development strategy in my view. But alas, the earthquake, one of the deadliest in human history, has now brought the society back to mass death and destitution.

DIA: How do you respond to critics who say that the Haitian government does not have the capacity to absorb so much aid, that aid efforts in the past have fostered a culture of dependence, and that much of this money only seems to benefit the powerful or crowd out local enterprise?Mr Sachs: Haiti needs to build from a state of physical and institutional collapse, so all of those worries are real and need to be considered. The thing that is absolutely unworkable is simply to transfer cash to the Haitian government. But I don't think that is what anyone in Haiti has in mind.What is needed are a set of specific investment programmes, targeted at key sectors, including peasant farmers, labour-intensive reconstruction of the capital city, power plants, roads, water systems and so forth. Some of these efforts will be rather complex, involving a large amount of engineering and logistics. So this is not aid in the sense of people writing checks to a foreign government. It is aid to finance and help design and manage targeted investment projects, each with their own professional component, and with Haitians playing a growing role over time. It's a series of discrete challenges that add up to a recovery and development strategy.

DIA: Based on what you're saying—the need for massive support from foreign donors and aid workers—how do we make sure that this effort doesn't foster a culture of dependence?Mr Sachs: To my mind a lot of the basic infrastructure issues are not about dependency per se, but about making the basic functions of life operational again. And so I would like to proceed pretty quickly on those fronts. Haiti needs power plants and roads. Getting those in place as soon as possible will reduce rather than increase “dependency”.I think that what is more important over time is that this effort is not about putting people in IDP camps, or handing out food. The way to beat dependency is to see the building of a viable Haitian economy as a core part of this process. In my view there are several different components to that. One is that, for the first time ever really, there needs to be a rural agricultural strategy so that peasants who are impoverished right now can start earning a living by producing food for the rest of their countrymen. And that is an empowering kind of assistance which builds from within. If you get bags of fertilizer to peasant farmers, who then turn out crops at yields three times of what they had done before—I've watched that happen in many places—that empowers rather than dis-empowers the farmers. That breaks dependency. It creates a commercial agricultural sector that right now doesn't exist and really hasn't existed in Haiti in a large part of the rural areas. Similarly, Haiti used to have hundreds of thousands of people working in assembly operations before political instability and trade embargoes killed the sector. That sector needs to be re-energised. It's not going to happen in the first year, but it can happen over a period of five years. Haiti also has had a vibrant tourist industry in the past, which has utterly disappeared. Tourism on the other side of Hispaniola has been a very big driver of the Dominican Republic's growth. Haiti can do the same thing in the coming years.The key, in short, to avoiding dependency, is to focus not on handouts but on building a viable economy in which Haitians will earn incomes, gain skills, form businesses, and become the masters of their own destiny. Development assistance is not the same as humanitarian aid (important as that is in the immediate aftermath of a disaster).

DIA: You've touched on it in your previous answers, but how responsible do you think the US is for Haiti's pre-earthquake struggles?Mr Sachs: Well, I don't think the US has ever had the combination of political will and substantive understanding to be a sustained helpful partner for Haiti. Clearly if Haiti had stronger internal leadership over the decades, it could have done vastly better despite America's combination of neglect, misunderstanding and often poor policy. But Haiti didn't have that internally, and the US has done a lot of things ranging from simple neglect to advertently or inadvertently destabilising the country. Whether it’s training generals who ended up making coups, supporting Papa Doc during certain periods of the cold war, enacting trade embargoes or chasing Aristide out of the country—those are all events that I would not put in the pro-development column. And I don't think the US has ever had a sustained political and conceptual approach to Haiti that came close to what we could and should have been doing to support Haiti’s long-term development. Now is the time to set a new course, based on sustained support, through a multilateral effort, and with Haiti’s sustained escape from poverty as the central objective.

5 de enero de 2010

Scrooge McDuck used to treat his money vault as a swimming pool, diving in and out of huge mounds of coins. Numbered Swiss bank accounts would have been more effective, but not much of a sight gag for a cartoon. And, I'm betting, not nearly so satisfying on a visceral level. Nope. Not much beats wallowing in money. Ask the hedge fund guys.

It turns out that there are lots of real-world Scrooges—people who simply enjoy the reality of having that big pile of accumulated wealth. In fact, they enjoy it so much that they reduce their spending because, in economist-speak, the utility of wealth is greater than of consumption. The utility of wealth also explains why wealthy people don't give more money to relatives and charities while they're alive, according to a recent study by Louis Kaplow, a professor of law and economics at Harvard.Kaplow says that patterns of spending and giving by wealthy people vary from what researchers would expect to see, but that the differences can be explained when taking into account how much people enjoy just having money around during their lifetimes. Why? Money helps make people feel safe, successful, and superior, if not smug.

Because wealthy people in fact consume less than expected, they actually wind up having more money to give away. Kaplow says actual bequests are greater than would be expected. However, while tax and estate rules would favor giving more money away during their lifetimes, this wealth effect causes many people to forgo such activities and, instead, pass on wealth largely through their estates when they die. They also don't give as much away to charities during their lives.

"Although charitable giving is exempt from both gift and estate taxation," he writes, "there is a substantial income tax incentive to give during one’s lifetime." That's because such gifts are deductible from income taxes. Deferring such gifts and wealth transfers "seems all the more surprising," he observes, because it also means forgoing "the joy of observing descendants or charitable beneficiaries make use of the gifts and the praise or status one may receive, and also the fact that earlier gifts may be more valuable to recipients."

Charities have been dealing with this wealth effect for a long time and try to develop effective strategies to counter it. Based on Kaplow's research, one effective approach would be to develop trusts and other legal agreements that allow charities to benefit from the use of a wealthy person's funds while providing the person with the comfort that, in theory, he or she could regain control of the wealth if they wanted. Maybe that mound of coins will no longer reside in the wealthy person's vault but it is still their pile of money, and they could play with it once again if they wanted.

In this year of deep recession, fortunate indeed are those with more money than they will spend over the rest of their expected lifetimes. If you're one of them, congratulate yourself. Next, please consider sacrificing some of that wealth effect and, instead, giving money right now to people and organizations who just might be able to use it better than you can.